As Donald Trump is heading for Europe, the global economy is beginning to show signs of strain from his “America First” policies. Against the backdrop of a looming all-out trade war, European leaders are going to insist on stepping back from the vicious circle of more tariff measures and more counter-measures.
German Chancellor Angela Merkel specifically warned US President Donald Trump against triggering a deeper conflict after the US President threatened to impose steep tariffs on European automobiles. In her speech to the Parliament, Ms. Merkel admitted that both sides were locked in something close to a trade war. “It is worthwhile to prevent this conflict from becoming a real war,” she said, adding that, however, this “would require both sides” to take steps.
Donald Trump said in an interview broadcast on Sunday (Jul 1) that Europe is “possibly as bad as China” on trade, as he stressed that he was still considering import taxes of 20% on EU cars. The EU has in turn imposed tariffs on iconic American brands and products such as bourbon, jeans and Harley-Davidson motorcycles, thus effectively slapping economic tariffs and combining them with a cultural dimension in a symbolic tit-for-tat response.
However, taking aim at Mr. Trump over his complaint that the EU, and in particular economic powerhouse Germany, is running a massive trade surplus against the United States, Chancellor Merkel said his calculation was skewed, as it is based only on goods, not services. “If you include services like the digital services, then you have a completely different trade balance sheet, with the US showing a surplus against the EU,” Chancellor noted. “It is almost old-fashioned to only calculate goods and not include services,” she added.